Brand and Customers Mark Norbom Prudential Corporation Asia November 2004
Delivering profitable and sustainable growth Accelerating profitability Building sustainability Continued strong growth Leveraging regional scale, expertise and innovation Creating a lasting foundation Driving proven success models to all markets Integrated operating model Leadership development Risk management Brand strength Business building expertise Multi-channel distribution Product innovation Customer centricity Strong top-line growth - even faster bottom-line growth
Our Brand : A Key Competitive Advantage Mina Hsu Prudential Corporation Asia November 2004
What is a brand? Sum of all Impressions Experience Feelings one has for a company / product 5
Brand important, especially in Asia Intangible products Difficult to understand Significant financial commitment Often long term Distributed through intermediaries Less bricks and mortar presence Deeply personal : Emotional connection critical Category not as developed as Europe / United States
Top 3 most important corporate attributes Trustworthy company Financially strong Understands and cares about its customers Source : Prudential Corporation Asia s Tracking Research conducted across Asia in 2002 and 2003 7
Our approach to building the brand in Asia
A strategy focused on our key brand differentiators Prudence UK heritage and credentials Understanding target customers needs
Prudence icon : A human face that sets us apart Prudence gives our brand a human face
Prudence : Visual link for all our operations 11
Prudence : Prominence across Asia Korea Hong Kong Philippines Indonesia Taiwan Japan India Vietnam China Malaysia Singapore
Leveraging our United Kingdom heritage as brand differentiator 13
A brand that truly listens : On-going dialogue with target customers to understand their needs Since 1994, continuous consumer research totals : Over 180 projects* Over 53,000 people Across 12 markets * Focus groups, face-to-face interviews and telephone surveys 14
Our brand achievements in Asia
Brand leadership : Impressive icon awareness Prudence enjoys impressive awareness that often surpasses local competitors and other foreign players, including the well-promoted HSBC icon. (Awareness is slightly lower in India due to no Prudential-only initiatives because of joint venture) % 100 90 80 70 86 72 96 82 94 100 76 93 81 60 50 40 30 20 32 45 54 36 51 44 26 50 39 28 36 26 10 0 Malaysia Singapore Hong Kong Thailand Indonesia Philippines India Japan Vietnam Taiwan China (GZ) Korea Year established 1924 1931 1964 1995 1995 1996 1998 1998 1999 1999 2000 2002 Source : Prudential Corporation Asia Tracking Research conducted across Asia in 2002-2003 1 4
Recognised as one of most trusted brands in Asia Prudential s ranking : Top 15% of all major global brands 2 nd among life insurers Source : 8,000 interviews in 8 countries: (China, Hong Kong, Taiwan, Philippines, Thailand, Malaysia Singapore and Indonesia) Brand that you trust the most / has best reputation 17
The different ways we leverage our brand Enhances leadership image Help attract customers, employees, distributors and partners Increase target prospects receptivity to solicitation Reaffirm customers choice of Prudential Supports specific business initiatives Launch new operations Launch new products Help gain new distribution Drives synergies and reaps cost benefits 18
Some examples
Malaysia Leveraging a significant milestone
China A template for launching new operations
Facilitate sharing across borders to reap cost benefits
Sharing across borders Voice-over languages Cantonese Mandarin Bahasa Thai Vietnamese English You ve seen the face, now you know what s behind it Used in 7 markets 23
Sharing across borders 2002 U-Link TVC for Taiwan in Mandarin 2004 PRUlink TVC for Indonesia in Bahasa 24
Sharing within the Group Spin-free guides from M&G will be adapted for use by Prudential Unit Trusts in Malaysia Will also translate into Chinese for Taiwan s use
Where is the money? Some examples
Leveraging synergies that drive a lower cost brand building model Total ad spend About 13 million per year [2002-2004] in 12 countries Modest in spite of rapid expansion Less than most of the key competitors* AIA 272 million (with Japan), 20 million (without Japan) AXA 18 million ING 7 million (mainly in 4 countries**) HSBC 33 million 2 Giants TVC Prudence face TVC 110,000 to produce once Used for 3 launches so far in China Cost per launch at end of 10 operations : 11,000 65,000 to produce once Usage in 7 countries Cost per country : 9,300 * Source : Mindshare ** Korea, Taiwan, Hong Kong, Malaysia
Summary Brand very important, especially for our industry and in Asia Prudential : Well-recognised and trusted brand in Asia A strong brand strategy built on consumer insights and key differentiators from competitors This competitive advantage is extended consistently into every new market / venture Leverage regional synergies to drive a lower cost brand building model without sacrificing local appeal and relevance Our brand strength : A valuable asset and a hard-to-duplicate competitive advantage
Customer Strategy Pierre Fenech Prudential Corporation Asia November 2004 29
Prudential Corporation Asia Customer needs drive what we do Competitive advantage through customer centricity What we do Analyse Insights Opportunities Drivers Where we apply it Prime segments Find / Win / Keep Product Distribution Servicing Customer experience Why we do it Tangible business benefits
Prudential Corporation Asia Systematic approach Standardised process applied to each market Raw data Census / Market demographics Field research Local MIS data Customer segment fact base Market overview Strategic options Customer and market management strategy Who to target? What triggers their needs? How to access? Value at stake in prime segments
Prudential Corporation Asia Overview of Asian markets Diversity in spreads with all populations ageing % 100 80 60 Population aged 18+ (2001 Census) Retired Empty nesters Mature parents Older parents 40 20 0 Size million China Japan Thailand Taiwan Hong Kong Total India Philippines Korea Malaysia Singapore 842 595 102 40 39 34 16 14 5 2 1,699 Young parents Mature singles Older singles Young singles Source : Asian demographics. Census data for Vietnam and Indonesia is unreliable
Prudential Corporation Asia Market demographics Opportunities from changing demographics Population million > Age 19 7 6 5 4 3 2 1 0 Hong Kong growth 1.5% per annum Population million > Age 19 Malaysia growth 3% per annum 0 2001 2011 2001 2011 20 18 16 14 12 10 8 6 4 2 Retired Empty nesters Mature parents Older parents Young parents Mature singles Older singles Young singles Source : Census data, Asian demographics
Prudential Corporation Asia Dynamic lifetime view Life stage trigger events Older singles 25-44 Mature singles 45-64 Young singles 19-24 Empty nesters 45-64 Retired 65+ Young parents 25-34 Older parents 35-44 Mature parents 45-64 Primary triggers Starts work Parents retiring Found other half Move up corporate ladder Buy car Buy home Parents retiring Death of parents Approaching retirement Death of parents First major illness Death of spouse Own retirement Death of parents Major illnesses Death of spouse Marriage/ Children related triggers : Marriage Kids Kids go to university Adult education Marriage Kids go to university Kids start work Kids get married Kids leave home Birth of grandchild Kids start work Kids get married Kids leave home Birth of grandchild 34
Prudential Corporation Asia Disposable savings High cash savings in banks across all segments Hong Kong allocation of disposable savings % 100 80 Insurance Mutual funds Stocks / Bonds 60 40 Savings (Bank) 20 0 Young singles Older singles Mature singles Young parents Older parents Mature parents Empty nesters Average Note : Excludes savings in real estate property Source : Prudential Research
Prudential Corporation Asia Segment penetration Opportunities within and across segments % 100 Hong Kong life insurance product holdings in the affordable sub-segment 80 Nil products 60 1 product only 40 20 2 + products 0 Young singles Older singles Mature singles Young parents Older parents Mature parents Empty nesters Source : Prudential Research
Prudential Corporation Asia Customer knowledge drives Segment strategy Value-based market strategies Product development Regional product lab Distribution strategy Segment access strategies
Prudential Corporation Asia Customer knowledge drives Customer profiling Segment based customer profiling Life stage servicing PruNurture programmes Customer experience Regional customer experience programme
Prudential Corporation Asia Why we do it Significant business benefits Effective marketing Customer needs drive what we do Systematic process Needs based sales Persistency Customer satisfaction Repurchase Advocacy
Insurance Overview Mark Norbom Prudential Corporation Asia November 2004
Insurance Overview Dan Bardin Prudential Corporation Asia November 2004
Introduction Since our last meeting 4 Years Of continued growth for Prudential Corporation Asia Of strengthening our position in Asia Of ongoing innovation in our business model 42
The evolving Asian marketplace Changing marketplace offering new opportunities for growth Trend 1 Trend 2 Trend 3 Trend 4 Increasing pace of deregulation Greater consumer sophistication Our success breeds imitators Stricter compliance environment 43
Our position in Asia Life businesses in each of the 12 largest Asian markets 44
Our flexible insurance model A flexible model that can adapt to each market Pre-1998 markets Markets Efficient market leader Hong Kong Malaysia Singapore Market developer Indonesia Thailand Philippines Description Established markets Growing sophistication Efficiency and productivity Opportunities Developing markets Opportunities to lead next stage of development Our model Broad product portfolio Segmented and efficient distribution Customer life cycle management Innovator in product development Innovator in new distribution 45
Our flexible insurance model A flexible model that can adapt to each market Post 1998 markets Markets Market maker Vietnam India China Differentiated player Taiwan Korea Japan Description Newly deregulated Rapid growth potential First mover opportunity New markets for Prudential Mature and competitive Deregulation opportunities Our model Simple product portfolio Rapid agency expansion Mass customer acquisition Pioneering distribution channels Innovative product portfolio Targeted customer acquisition 46
Leadership across our markets Delivering enormous success for Prudential Corporation Asia Market share* No 1 India** Vietnam Recognition Global Marketing Grand Prix Award for launch of PCA Platinum Annuity in Korea (Korea) No 2 No 3 No 4 No 5 Malaysia Indonesia Singapore Hong Kong China (Guangzhou) Philippines Named Best Life insurer by Outlook Money Magazine and Most Trusted by Economic Times (India) Top 5 greatest potential life insurers in China (China) Voted one of the 5 most reputable Taiwanese Life Insurers by Commonwealth Magazine (Taiwan) Golden Dragon Prize 2 years in a row (Vietnam) * New Business Annual Premium Equivalent 31 December 2003 ** Private sector 47
Evolution of our model Expansion of distribution channels and innovation of the product mix % 100 90 80 70 60 50 40 30 20 10 0 Channel evolution 2000 2001 2002 2003 Q3/2004 Shift to linked business Half year 2004 NBAP 135m Linked 44% A&H 28% Traditional 28% % Agency % PD 48
New organizational structure A new organizational structure to manage the business 2000 structure Our current life model Established markets Emerging markets Greater China Insurance Managing Director One integrated life division Integrated, Regional Strategy view Consistency in performance Communication and co-ordination with other regional departments 49
Local and regional integration An integrated regional and local approach to the market 1 regional team 12 local markets Regional view Base of experience Prudential best practice Future leadership resource Experiences Resources Initiatives Local view Local expertise Tailoring to market context Making it add up to more than 12 50
Evolving the model : Channel innovation Migrating to a multi-channel distribution model China, Vietnam Traditional Tied agency Indonesia, Philippines Traditional Tied agency Single channel bancassurance Hong Kong, Malaysia, Singapore, Taiwan, India, Japan, Thailand Segmented agency Multi-channel bancassurance Korea Financial Advisors Multi-channel bancassurance Non-bank direct marketing / telemarketing Non-tied agents Channel evolution drives additional growth opportunities 51
Evolving the model : Life cycle relationship Increasing sophistication in our customer and product model Products Comprehensive product portfolio Flexible and innovative products Advantage in linked business Needs based selling Customers Life-cycle relationship Customer-centric technology Managed profitably across the business 52
Evolving the model : Regional platform Consolidation of IT platform and processes to create a step change in our operating configuration Prudential Services Asia model Prudential Services Asia hub Opportunities Lower cost base Re-modelled, best in class processes Removal of system duplication Superior management information Malaysia operation Singapore operation Future operations Increased speed to market 53
Summary Rapid and substantial change in the last four years A single, consolidated regional team to manage our growing business Proven success in tailoring regional best practices to local market conditions Significant opportunities to evolve our model going forward Processes and management structure in place to drive this change and strengthen our leadership in Asia 54
Our Product Strengths Mark Norbom Prudential Corporation Asia November 2004
Delivering profitable and sustainable growth Accelerating profitability Building sustainability Continued strong growth Leveraging regional scale, expertise and innovation Creating a lasting foundation Driving proven success models to all markets Integrated operating model Leadership development Risk management Brand strength Business building expertise Multi-channel distribution Product innovation Customer centricity Strong top-line growth - even faster bottom-line growth
Successful Product Management Garth Jones and Nishit Majmudar Prudential Corporation Asia November 2004 57
Prudential s diversity in Asia is a core strength Approach to product management Managing for profitability Focusing on the long term Introducing innovative products Management of geographic and product mix delivers consistent, good performance whilst enabling us to position each business for the long term Leveraging regional and Group expertise
Active management of products and geography provides stability of margins % 70 NBAP margin on APE 60 50 40 30 Average margin = 55 % 20 10 0 H101 FY01 H102 FY02 H103 FY03 H104
Prudential s perspective : Margins vary by geography Market NBAP drivers vary by country High NBAP / APE Low Malaysia Singapore Hong Kong China Taiwan Complex factors drive market profitability : Regulation Size of market Competition Product preferences Distribution channels Korea India Low High Sales volume
Prudential s perspective : Margins vary by product Market NBAP drivers vary by product High NBAP / New business Low A&H Unit Linked RP Traditional RP Unit Linked SP Traditional SP Low High Sales volume Single premium is low margin high volume Regular premium higher margin than single Unit Linked higher margin than traditional A&H has highest margin, but volumes lowest
Significance of unit linked Comparison of discounted cashflows for unit linked and non unit linked products Cumulative DCF Traditional Unit linked 0 5 10 15 20 Time (years) Prudential Malaysia : Traditional and linked products with riders attached
Results of active management Changing NBAP contributions by country FY 2001 HY 2004 Malaysia High HK High Malaysia NBAP / APE Sing NBAP / APE Sing Taiwan Low Taiwan Low Korea HK Japan Low High Sales volume Low High Sales volume
Prudential s approach in Taiwan Higher margin, slower increase in volume FY 2001 HY 2004 High NBAP / APE High NBAP / APE Taiwan Low Taiwan Low Low High Sales volume Low High Sales volume
Background to Hong Kong Popularity of unit linked products correlated to stock market performance Traditional single premium sales are correlated with interest rates Stock index 140 120 100 80 60 40 20 0 Hong Kong : Unit linked 96 97 98 99 00 01 02 Hang Seng Linked as % of NBAPE 03 Q3/04 % % 50 45 40 35 30 25 20 15 10 5 0 Hong Kong : Traditional single premium 7 6 5 4 3 2 1 0 6 months interbank rates Sales volume 99 00 01 02 03 Q3/04 million 150 125 100 75 50 25 0 Sources : Datastream
Prudential s approach in Hong Kong Lower margin but maintaining position as scale player FY 2001 HY 2004 High Hong Kong High NBAP / APE Low NBAP / APE Low Hong Kong Low High Sales volume Low Sales volume High
Prudential s approach in North Asia North Asia : Reducing contribution from Japan, increasing Korea FY 2001 HY 2004 High High NBAP / APE NBAP / APE Low Low Korea Japan Low High Sales volume Low High Sales volume
Case study : Product strategy in Singapore Increased proportion of regular premium % 100 90 80 70 60 50 40 30 20 10 0 Regular premium APE as % of total APE Prudential Rest of market 95 96 97 98 99 00 01 02 03 Q2/04
Case study : Evolving market in Singapore Single premium products in Singapore SP unit linked S$m APE 70 60 50 40 30 20 10 0 95 96 97 98 99 00 01 02 03 Q2/04 % Market share 80 70 60 50 40 30 20 10 0 SP unit linked new business S$m APE Unit linked SP business market share Traditional SP business market share
Case study : Success of unit linked in Singapore PruLink Singapore Managed Fund Prudential was the first to launch regular premium unit linked policies in Singapore in 1992 Singapore Managed Fund won the 10-Year Special Award at the Investment Fund Awards 2002 for the highest absolute returns over 10 years It is Singapore s largest unitised fund valued at 603 million as at 1 October 2004
Case study : Singapore unit linked Singapore : PruLink Managed Fund outperformance 240 220 PruLink Singapore Managed Fund 200 180 Benchmark 160 140 120 100 80 11/92 11/93 11/94 11/95 11/96 11/97 11/98 11/99 11/00 11/01 11/02 11/03
Case study : Maintaining a lead Singapore : Through diversification of fund range and low expense ratios Fund size ( m) at 1 October 04 Expense ratio at 1 October 04 Expense ranking relative to market PruLink Fund Managed 603 1.01% 2/4 Asian equity 240 1.36% 8/17 Asian reach 76 0.97% 2/24 China India 34 ------ ------ Global managed 33 1.03% 7/12 Global equity 35 1.54% 5/27 Global bond 35 0.53% 1/12
Case study : Pioneering unit linked in Asia Country Sing Malay Thai Indo Phil Vietnam India HK Taiwan China* Japan Korea Unit linked allowed Prudential Corporation Asia launch 1992 1992 1997 1997 2004 2001 1995 2002 2000 2003 2004 1997 1997 2004 2001 1995 2002 2000 2003 2004 Prudential Corporation Asia first to market
Case study : Increasing profitability through rider attachment Compare experience from market to market; identify opportunities Focus on new rider development to improve attachment ratios Malaysia : Average number of riders 1994 1997 H12004 3 4 6 Region led roll out of riders : Critical illness addition Spouse Waiver Major Medical
Summary Prudential s balanced portfolio of geography and product is a core strength Enables dynamic management of mix to position each market for long term value creation whilst delivering consistently good performance Leverage experience from one market to another Prudential has a proven track record of delivering value from its product management
Life Product Design Pete Lloyd Prudential Corporation Asia November 2004 76
Product regulation in Asia Diversity 12 regulators and sets of rules UK or US influenced 90/10 funds, US style or hybrid Common themes Innate conservatism Protectionist Focus on product (rather than distribution) Formulaic pricing Prescribed assumptions
Regulators influence on product design Regulators quite prescriptive in many markets Approval of all product features Regulator defines premium basis Minimum surrender value Singapore Malaysia Hong Kong Taiwan Japan Korea Vietnam China India Thailand Indonesia Philippines
The actuarial profession in Asia Increasing influence in the last few years Country HK SG MY JN KA TW Indo Phil Thai VN China India Local actuarial organisation Local actuarial qualitications
Availability of data More limited local information requires a well considered approach Industry mortality data Industry morbidity data HK SG MY JN KA TW Thai China India JN KA
Reserving and solvency requirements Mixed fortunes of solvency regulation in Asia Prudent regimes and stable markets in most territories State bail outs True position obscured by conglomerate status Industries too big to let fail Different regulatory reserving and solvency requirements Risk Based Capital in some markets Percentages of reserves and sums at risk in others Minimum fixed amounts affect smaller business and start-ups
Prudential s approach in Asia Depth of resources Actuarial teams in each local operation Regional team mix of local and international expertise Secondments from Group Advantaged approach to product design : Local knowledge and regional synergies 2 green light approval process for new products Ongoing evaluation of performance Taking a lead in the industry : Advise regulators Support actuarial societies
Advantaged approach to product design Product innovation driven by effective mix of local knowledge and international expertise Customer centricity Meet customer needs Add to or replace current products Satisfy PRE Financials Positive contribution to estates Capital efficiency Reinsurance Profitability Sensitivities analysis Regulatory and compliance Distributors have appropriate sales skills Appropriate benefit illustrations Manage risks we take with margins we make
Product design objectives Profit profile Returns to policyholders 200 350 300 150 100 Minimise new business financing requirement 250 200 Total return 50 Accelerate payback 150 100 Maximise the gap 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 50 Guaranteed return -50 Reduce strain 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Advantaged approach to product design Product innovation driven by effective mix of local knowledge and international expertise Customer centricity Meet customer needs Add to or replace current products Satisfy PRE Financials Positive contribution to estates Capital efficiency Reinsurance Profitability Sensitivities analysis Regulatory and compliance Distributors have appropriate sales skills Appropriate benefit illustrations Manage risks we take with margins we make
Ongoing assessment of existing products Delivery against expected performance Against reserving parameters Against Achieved Profits assumptions Active management of Par Fund PRE and bonus rates Bonus rate reductions where necessary Clear communication with policyholders Managed shift towards terminal bonuses Withdrawal of products which cannot be modified to meet requirements Annuities in Singapore Corporate channel business in Japan
Taking a lead in the industry Contributing to the development of regulation Provide information on and exposure to other markets Facilitate contacts with UK and other regulators Help frame new regulations to meet market needs Supporting the actuarial profession Staff take leading roles in local actuarial societies Contribute to conferences and seminars Encourage professional study and development
Summary Complex regulatory and competitive environment in Asia influences product design We have : an advantaged mix of local and regional expertise well structured processes to control product risks a proven record of positively impacting business and the industry
Customer Centricity in Product Development and Communication Ken Ng Prudential Hong Kong November 2004 89
Creating a virtuous circle : Needs-based approach is a competitive edge Brand credo : Listen. Understand. Products and services that meet customers needs Insights from really listening to customers Customer Acquisition / loyalty Insights accumulate over time and difficult to replicate 90
Product development process Product development process is strengthened with customer perspectives Review and evaluate : Insights for future new product efforts 1 2 3 4 5 Idea generation Initial screening of ideas Business potential evaluation Concept development Implementation Customer / Needs segmentation Customer focus groups Customer-focused tools add additional dimensions and depth to the process
Using consumer research : Example 1 Consumer research helps generate valuable insights to sharpen product and marketing propositions Attracting young singles Common belief : Young people don t have money to save they just want some protection Findings : Young people want to save, as much as 10% of income but they want liquidity Action : We developed PRUcash, a savings product with high liquidity Result : 40% of PRUcash sales are aged 20-30 Average premium 50% higher
Using consumer research : Example 2 Consumer research helps generate valuable insights to sharpen product and marketing propositions Targeting retirement Common belief : Old singles are the best targets for retirement products because they don t have children to support them in old age Findings : Older single people are not receptive to concept they have retirement needs but are unwilling to commit because of sense of uncertainty Action : Target product at married people aged 40-50 who are more receptive
Use insights to improve product communication Our old approach By Product Quotation insert Quotation insert Quotation insert Costly to produce Many items to maintain Product brochure Product brochure Product brochure Contents may overlap Inconsistent look and feel Fact sheet Fact sheet Fact sheet Product-based
Product communication : Example Old approach 95
Product communication : New approach Our new lifestage modular approach Sales tools Segment folders Needs leaflets Young singles Savings Married with family Retirement Mature Protection Generic Investment linked Investment Single Sheet product fact sheet / brochure Fact sheet Fact sheet Fact sheet Fact sheet Fact sheet Fact sheet Simple, intuitive, flexible, cost-effective
Product communication : Example Blessed with kids Young dream-seekers Carefree years 97
Summary Brand credo : Listen. Understand. Customer centricity in product development Propositions which meet customers needs Cumulative and difficult to replicate Products and services that meet customers needs Insights from really listening to customers Customer Acquisition / loyalty A competitive advantage 98